Cheap Chinese electric cars are about to upend the US auto market

• Chinese brands have mastered the quality and affordability of electric vehicles.
• After years of eyeing the US market, Chinese brands are poised to arrive.
• The competition from Chinese brands is ‘very real’.

After years of preparation, Chinese auto companies are preparing to change the electric vehicle market in the United States.

Industry watchers say it’s only a matter of time before Chinese automakers bring their impressive — and more importantly, cheap — electric cars to the United States. After years of threatening to set up shop on American shores, companies are closer than ever to moving to the States.

On its own turf, Chinese companies have already outmaneuvered their American rivals, grabbing market share from the likes of Ford and General Motors by offering shoppers better-quality, cheaper electric cars. They have also started exporting a large number of brands to Europe.

As Chinese auto industry leaders like Nio and Geely look to move to the US, the big question is can they overcome the political frictions — and will American buyers keep riding in?

“It will be interesting to see if Ford and GM and the like can avoid entering the Chinese competition,” said Martin French, managing director at consulting firm Berylls. “From what we saw at the Shanghai Auto Show this year, that competition is very real.”

China’s electric vehicle industry has exploded in recent years. In 2022, electric vehicle sales in the United States hit a new high of 800,000, while Chinese buyers purchased nearly 5 million all-electric passenger vehicles. After years unchallenged, Tesla is about to lose its crown as the world’s largest maker of electric cars to a Chinese company, BYD.

Toyota, Hyundai, now BYD

In the 1970s, Japanese car companies such as Toyota and Honda rushed in with affordable, fuel-efficient cars, troubling American automakers in their wake. Recently, Korean brands like Hyundai and Kia have been lunching Ford and GM on SUVs.

History may repeat itself. Analysts said that Chinese electric vehicle manufacturers could gain a foothold in the United States by reaching a budget price point.

“Is it possible for Chinese companies to do what others did before, only now with electric vehicles? The answer is absolute,” Bill Russo, former CEO of Chrysler and CEO of Automobility, a Shanghai-based consulting firm, told Insider. Who wouldn’t want affordable cars?

But as political tensions between China and the United States intensify, entering the US market may be more painful for China than it was for Japan or Korea. In addition to general concerns about consumers who may be less likely to support a Chinese brand, analysts said, lawmakers are likely to apply increased scrutiny to any Chinese company that has plans to operate in the United States.

The Trump-era import tariff of 27.5% still applies to Chinese cars, while the Biden administration’s new tax breaks for electric vehicle purchases favor vehicles built in North America with battery components that don’t come from China.

China wins on prices

American brands, including electric vehicle leader Tesla, have long been promising a long-range EV option at or under $30,000. But progress has been slow, sometimes regressive. GM plans to scrap the Bolt EV, America’s cheapest EV, by the end of 2023 and use that factory to build expensive electric trucks instead.

Meanwhile, Chinese brands are unmatched in terms of affordability both at home and in Europe.

One of the most popular electric cars in China is the Wuling Hong Guang Mini, a small city car that costs the equivalent of $5,000. At Auto Shanghai last month, BYD debuted a sleek pint-sized hatchback called the Seagull with an estimated range of 190 miles. starting price? Less than $11,000.

Tu Le, managing director of Sino Auto Insights, a consulting firm specializing in the Chinese auto industry, says Chinese companies don’t skimp on quality for the sake of affordability.

“They have the products that support it,” he said. “I’ve driven a number of Chinese electric car brands, and boy oh boy, the Europeans are in trouble.”

But Chinese hegemony will not happen overnight

Even when Chinese brands hit American shores, it won’t happen all at once. These companies are likely to test lower-volume launches and study the market before diving in fully. Of the dozens of brands that might want a slice of the pie, Lo said, only a few will be able to sell in the US at any significant volume.

Russo said the automakers most likely to penetrate first will be those that already have a global presence: Geely and BYD. (BYD’s CEO recently said the company isn’t currently eyeing the U.S. passenger car market, but the company already has a small commercial vehicle footprint here.)

Polestar, a Swedish electric vehicle brand owned by Geely and Volvo, is already importing from China. The startup, Nio, has announced plans to enter the United States by 2025.

The next step: establishing manufacturing in North America, which Lu expects Chinese companies to do once they break into the market. He said the sheer size of the US auto market means that new entrants will need to be built locally to compete seriously over the long term.

“Americans think the tsunami is coming from Silicon Valley. It’s not,” Lu said. “It comes from both directions.”